A smaller version of the has been rumored for quite some time now, although had been doing a great job deflecting the talk as just that: "rumors." But now that has taken over Porsche, executives have let fly with a few choice quotes, and it looks almost certain that Porsche will produce the so-called "Baby Boxster."

So just why would Porsche build such a car, which has the potential to dilute the iconic German sports-car brand? Simple: To boost volume. Germany's Autobild says VW Group chairman, Martin Winterkorn, wants to add some 50,000 vehicles per year to the Porsche mix by 2013, while Britain's Autocar quoted Winterkorn as saying Porsche is "...investigating opportunities for a smaller sports car and a smaller SUV." Our U.S. Porsche source wasn't as forthcoming, but he did say, "Now with VW firmly in the mix, the possibilities seem to have quadrupled."

While the smaller Porsche (reportedly named "New 356" internally) will share its mid-engine platform with the upcoming and the , the power source will not be a 2.0-liter turbocharged inline-4 from the VW/Audi parts bin as originally thought. Instead, the latest rumor is that Porsche is developing a horizontally opposed 4-cylinder, in keeping with the company's long-standing tradition of boxer-type engines. Turbocharging will enable the New 356's engine to produce 250–300 bhp.

Despite the fact the New 356 will be smaller, lighter and use a 4-cylinder engine, we're told the car will still cost around $40,000 when it hits the road in late 2012, meaning it will undercut the base Boxster/ by only a few thousand dollars.